-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PzYgbYS7G3EnbE34a5BFjzckBSlT+vt9pK3bySmZy2x2F+qASSWVjVpXctON4L0c K0rt7pUU8Ev5Hj1PuuA6YA== 0000950136-97-000720.txt : 19970613 0000950136-97-000720.hdr.sgml : 19970613 ACCESSION NUMBER: 0000950136-97-000720 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 19960302 FILED AS OF DATE: 19970612 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: DONNKENNY INC CENTRAL INDEX KEY: 0000029693 STANDARD INDUSTRIAL CLASSIFICATION: WOMEN'S, MISSES', AND JUNIORS OUTERWEAR [2330] IRS NUMBER: 510228891 STATE OF INCORPORATION: DE FISCAL YEAR END: 1204 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-21940 FILM NUMBER: 97623049 BUSINESS ADDRESS: STREET 1: 1411 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 BUSINESS PHONE: 5402286181 MAIL ADDRESS: STREET 1: 1411 BROADWAY CITY: NEW YORK STATE: NY ZIP: 10018 10-Q/A 1 AMENDED FORM 10-Q SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QA [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 2, 1996 ------------- OR [ ]TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 0-21940 ------- Donnkenny, Inc. ------------------------------------------------------ (Exact name of registrant as specified in its charter) Delaware 51-022889 ------------------------------- ---------------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1411 Broadway, New York, NY 10018 ---------------------------------------- ---------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (212) 730-7770 -------------- NOT APPLICABLE ---------------------------------------------------- (Former name, former address and former fiscal year, if changed since last report.) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), Yes _X_ No ___ and (2) has been subject to such filing requirements for the past 90 days. Yes _X_ No ___. Indicate the number of shares outstanding of each of the issuer's classes of Common Stock, as of the latest practicable date. Common Stock $0.01 par value 13,973,840 ------------------------------- ------------------- (Class) (Outstanding at March 2, 1996) DONNKENNY, INC. AND SUBSIDIARIES INDEX TO CONSOLIDATED FINANCIAL STATEMENTS (FORM 10-QA) PART I - FINANCIAL INFORMATION Page ---- Consolidated financial statements: Balance sheets as of March 2, 1996 (unaudited) and December 2, 1995...I-1 Statements of operations for the three months ended March 2, 1996 and March 4, 1995(unaudited)..........................II-1 Statements of cash flows for the three months ended March 2, 1996 and March 4, 1995(unaudited).........................III-1 Notes to consolidated financial statements...........................IV-1 Management's Discussion and Analysis of Financial Condition and Results of Operations............................................... V-1 PART II - OTHER INFORMATION Signatures.........................................................VI-1 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Balance Sheets (In Thousands) March 2, 1996 and December 2, 1995
March 2, December 2, 1996 1995 -------------- ------------ (Restated unaudited) (Restated) ASSETS CURRENT: Cash $ 432 $ 2,688 Accounts receivable - net of allowances of $1,678 and $1,946 in 1996 and 1995, respectively 32,113 49,834 Recoverable income taxes 4,573 6,921 Inventories (Note 2) 51,684 47,660 Deferred Tax Assets 2,414 2,414 Prepaid expenses and other current assets 1,554 1,464 -------- -------- TOTAL CURRENT ASSETS ` 92,770 110,981 Property, plant and equipment, net 12,307 12,670 Intangible assets 33,665 34,013 -------- -------- Total Assets $138,742 $157,664 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT: Current portion of long-term debt $ 6,067 $ 7,092 Accounts payable 13,920 13,178 Accrued expenses and other current liabilities 7,610 10,354 ------- ------- TOTAL CURRENT LIABILITIES 27,597 30,624 Long-term debt, net of current portion 41,245 55,519 Deferred income taxes 6,287 6,287 STOCKHOLDERS' EQUITY: Common stock, $.01 par value. Authorized 20,000 shares; issued and outstanding 13,972 and 13,968 shares in 1996 and 1995, respectively 139 139 Additional paid-in capital 45,786 45,744 Retained earnings 17,688 19,351 -------- -------- Total stockholders' equity 63,613 65,234 Total Liabilities and Stockholders' Equity $138,742 $157,664 ======== ========
See accompanying notes to consolidated financial statements. I - 1 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Statements of Operations (In Thousands, Except Share and Per Share Data) (Unaudited)
Three Months Ended -------------------------------- 3/2/96 3/4/95 ---------------- --------------- (Restated) (Restated) Net sales $ 42,537 $ 24,702 Cost of sales 30,817 18,330 ------------ ------------ Gross profit 11,720 6,372 Selling, general and administrative expenses 12,993 5,747 Amortization of goodwill and other related acquisition costs 360 201 ------------ ------------ Operating (loss) income (1,633) 424 Interest expense 1,113 671 ------------ ------------ Loss before income taxes (2,746) (247) Income tax benefit (1,083) (93) ------------ ------------ Net loss $ (1,663) $ (154) ============ ============ Net loss per common share $ (0.12) $ (0.01) ============ ============ Weighted average number of common shares outstanding and common stock equivalents 13,972,118 13,645,640 ============ ============
See accompanying notes to consolidated financial statements. II - 1 DONNKENNY, INC. AND SUBSIDIARIES Consolidated Statements of Cash Flows (In Thousands) (Unaudited)
THREE MONTHS ENDED ---------------------- March 2, March 4, 1996 1995 ---------- ---------- CASH FLOWS FROM OPERATING ACTIVITIES: (Restated) (Restated) Net loss $ (1,663) $ (154) Adjustments to reconcile net loss to net cash provided by operating activities: Depreciation and amortization of fixed assets 526 272 Amortization of intangibles 360 201 Accretion of debt discount -- 6 Provision for losses on accounts receivable 268 420 Changes in assets and liabilities: Decrease in accounts receivable 17,453 15,294 Decrease (increase) in recoverable income taxes 2,348 (146) Increase in inventories (4,024) (12,105) Increase in prepaid expenses and other current assets (90) (207) Increase (decrease) in accounts payable 742 (3,234) Decrease in accrued expenses and other current liabilities (2,756) (165) -------- -------- Net cash provided by operating activities $ 13,164 $ 182 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of fixed assets (163) (296) -------- -------- Net cash used in investing activities (163) (296) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of long-term debt (18,299) (12,402) Long-term borrowings 3,000 12,500 Net proceeds from secondary offering 42 -- -------- -------- Net cash (used in) provided by financing activities (15,257) 98 -------- -------- NET DECREASE IN CASH $ (2,256) $ (16) CASH, AT BEGINNING OF YEAR 2,688 1,606 -------- -------- CASH, AT END OF QUARTER $ 432 $ 1,590 ======== ========
See accompanying notes to consolidated financial statements. III - 1 DONNKENNY, INC. AND SUBSIDIARIES Notes to Consolidated Financial Statements (In Thousands Except Per Share Data) NOTE 1 - BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements have been prepared by the Company pursuant to the Rules of the Securities and Exchange Commission ("SEC") and in the opinion of management, include all adjustments, (consisting of normal recurring accruals) necessary for the fair presentation of financial position, results of operations and cash flows. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules. The Company believes the disclosures made are adequate to make such financial statements not misleading. The results for the interim periods presented are not necessarily indicative of the results to be expected for the full year. These financial statements should be read in conjunction with the Company's December 31, 1996 Form 10-K which includes restated financial information for the 1994 and 1995 fiscal years. Balance sheet data as of December 2, 1995 has been derived from audited financial statement of the Company. NOTE 2 - INVENTORIES Inventories consist of the following: March 2, December 2, 1996 1995 ---------- -------------- (Restated see Note 1) Raw materials $12,115 $11,071 Work-in-process 5,030 4,783 Finished goods 34,719 31,806 ------ ------ $51,864 $47,660 ======== ======= NOTE 3 - ACQUISITIONS In June 1995, the Company completed its acquisition of Beldoch Industries Corporation ("Beldoch"). In July 1995, the Company completed the purchase of certain assets of the Sportswear Division of Oak Hill Sportswear Corporation ("Oak Hill"). NOTE 4 - STOCK SPLIT On November 17, 1995 , the Board of Directors authorized a two-for-one stock split which was paid to all holders of record on December 4, 1995. All references in the accompanying consolidated financial statements to number of shares, per share amounts, and prices of the Company's common stock for periods prior to December 4, 1995 have been restated to reflect the stock split. IV-1 NOTE 5 - RESTATEMENT OF FINANCIAL INFORMATION The Company has restated its financial statements for the years ended December 2, 1995 and December 3, 1994, as well as the quarters within such years and the two quarters of fiscal 1996 because of errors discovered for those periods subsequent to the issuance of such financial statements. The financial statements for the aforementioned periods required restatement to correct the reporting for the recognition of net sales, cost of sales and certain expenses. The third quarter of fiscal 1996 was restated for the rescission of the Fashion Avenue acquisition and to reflect additional reserves for sales returns and allowances. The impact of the restatement on the Company's statement of operations and balance sheets is summarized as follows:
3 MONTHS ENDED March 2, 1996 March 4, 1995 - -------------- ----------------------------- ------------------------------ (As Originally (As Originally STATEMENT OF OPERATIONS Reported) (Restated) Reported) (Restated) - ----------------------- --------- --------- --------- --------- Net sales............................................ $52,194 $42,537 $39,112 $24,702 Gross profit........................................ 14,877 11,720 11,386 6,372 Operating income (loss).......................... 5,575 (1,633) 4,238 424 Net income (loss).................................. 2,655 (1,663) 2,105 (154) Per common share: Net income (loss).......................... $0.19 ($0.12) $0.15 ($0.01) March 2, 1996 December 2, 1995 -------------------------------- ------------------------------ (As Originally (As Originally BALANCE SHEET Reported) (Restated) Reported) (Restated) - -------------- --------- ---------- --------- ---------- Current Assets..................................... 94,408 $92,770 111,603 $110,981 Total Assets........................................ 143,741 138,742 161,647 157,664 Total Liabilities.................................... 72,684 75,129 93,287 92,430 Stockholders' Equity.............................. 71,057 63,613 68,360 65,234
IV-2 DONNKENNY, INC AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS COMPARISON OF QUARTERS ENDED MARCH 2, 1996 AND MARCH 4, 1995 Net sales increased by $17.8 million, or 72.2% from $24.7 million in the first quarter of fiscal 1995 to $42.5 million in the first quarter of fiscal 1996. The increase in net sales was primarily due to $18.1 million of incremental net sales from Beldoch and Oak Hill which were acquired in June and July 1995, respectively, which more than offset declines in the other divisions. Gross profit for the first quarter of fiscal 1996 was $11.7 million or 27.6% of net sales compared to $6.4 million or 25.8% of net sales during the first quarter of fiscal 1995. The increase was primarily due to higher gross margin from Beldoch and Oak Hill, which were acquired in June and July 1995, respectively. Selling, general and administrative expenses increased from $5.7 million in the first quarter of fiscal 1995 to $13.0 million in the fist quarter of fiscal 1996. As a percentage of net sales, these expenses increased from 23.3% in the first quarter of fiscal 1995 to 30.5% in the first quarter of fiscal 1996. The increase in SG&A expenses in the aggregate and as a percentage of net sales was due primarily to the higher selling, general and administrative expenses related to Beldoch and Oak Hill, which were acquired in June and July 1995, respectively. Amortization of goodwill and other related acquisition costs was $0.4 million during the first quarter of fiscal 1996 compared to $0.2 million during the first quarter of fiscal 1995, due to the businesses acquired in June and July of fiscal 1995 being included for the first quarter in fiscal 1996. Interest expense increased from $0.7 million during the first quarter of fiscal 1995 to $1.1 million during the first quarter of fiscal 1996. The increase was the net result of higher average borrowings under the Company's credit facility required to finance the acquisitions of Beldoch Industries in June 1995 and Oak Hill Sportswear in July 1995 and to finance additional working capital needs. The Company provided for taxes at an effective rate of 39.4% for the first quarter of fiscal 1996 and 37.7% for the first quarter of fiscal 1995. LIOUDITY AND CAPITAL RESOURCES The Company's liquidity requirements arise from the funding of working capital needs, primarily inventory and accounts receivable, and interest and principal payments related to certain indebtedness. The Company's borrowing requirements for working capital fluctuates throughout the year. Capital expenditures were $0.2 million for the first quarter fiscal 1996 compared to $0.3 million in the first quarter of fiscal 1995. The Company may spend up to $2.0 million annually on capital investments in accordance with the Chemical Bank Revolving Credit Agreement described below. The company has no material capital expenditure commitments. Donnkenny Apparel, Inc. and Beldoch Industries Corporation (Both wholly-owned subsidiaries of the Company) as borrowers, the Company and the Company's other two subsidiaries as guarantors and Chemical Bank, Bank of New York and Chase Manhattan Bank as lenders are parties to a credit facility (The " Chemical Bank Credit Facility") in a maximum aggregate principal amount of $85.0 million which was entered into in June 1995. The Chemical Bank Credit Facility is comprised of a $60.0 million revolving credit facility and a $25.0 million term loan facility. The Chemical Bank Credit Facility requires compliance with certain financial performance tests on a quarterly basis that the Company expects to be able to meet. As of April 3, 1996, $11.6 million was available under the revolving credit facility provided under the Chemical Bank Credit Facility. During the first quarter of fiscal 1996 and fiscal 1995, the Company's operating activities generated cash principally as the result of decreases in accounts receivable offsetting increases in inventories in both years and a decrease in accounts payable in fiscal 1995. The Company believes that amounts under the revolving credit facility provided under the Chemical Bank Credit Facility will be sufficient to offset any negative V - 1 operating cash flows and capital expenditures, and with an adjustment to accommodate increased outstanding letter of credit facilities which is being discussed with the lenders under the Chemical Bank facility, will provide the Company with sufficient cash for its needs for the foreseeable future. V - 2 S I G N A T U R E S Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Donnkenny, Inc -------------- Registrant Date: June 11, 1997 ------------------- ---------------------- Harvey Appelle Chairman of the Board President and Chief Executive Officer Date: June 11, 1997 ------------------- ----------------------- Stuart S. Levy Vice President - Finance and Chief Financial Officer, (Principal Financial Officer) VI - 1 -----END PRIVACY-ENHANCED MESSAGE-----